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Operator
Ladies and gentlemen, thank you for standing by. Welcome to the LTCH LTD third quarter 2021 financial results conference call. All participants are present in the listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. Before I turn the call over to Mr. Elie Yaffe, Chief Executive Officer, and Alon Mualim, Chief Financial Officer, I'd like to remind you that LTAC's earnings released today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions. Expectations and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements These forward-looking statements are projections and reflect the current beliefs and expectations of the company. Actual events or results may differ materially. LTCH undertakes no obligation to publicly release revisions to the such forward-looking statements to reflect events or circumstances occurring subsequent to this date. I will now turn the call over to to Mr. Eli Yaffe. Mr. Yaffe, please go ahead.
Elie Yaffe
Thank you. Good morning, everyone. Thank you for joining us and welcome to LTCH 2021 third quarter running call. With me is Alon Moalem, our chief financial officer. We will begin by providing you with an overview of our business and summary of the principal factors that affected our results in the third quarter of 2021. followed by the details of our financial results. After our prepared remarks, we will be happy to answer any of your questions. By now, everyone should have access to our set quarter earning press release, which was released earlier today. The release was also available on our website at www.nistecheltech.com. This quarter was very challenging, both operationally and business-wise. In addition to the COVID-19 pandemic that was affecting us, our results were affected by the reduced number of working days during the quarter compared to the number of working days in the third quarter of 2020. In addition, our results were impacted by the strength of the new Israeli shekel compared to the US dollars during the third quarter. Nevertheless, we were able to maintain operating profitability Also, our revenue declined from $9.3 million in the third quarter of 2020 to $8 million in the third quarter of 2021. The spread of COVID-19 was still affecting some of our customers in India, while during Q3 2021, we had partial recovery of the prior AP supply compared to the shortage that we faced during Q1 2021. This created operational and business challenges during the nine months ended September 30, 2021, which required quick adjustment to enable us to maintain production and deliveries of PCB to our customers. Due to the raw material worldwide shortage, we purchased during Q3 2021 a sufficient amount of inventory ahead of time and also alternative raw materials that were pre-approved two years ago as a backup plan for our production of PCBs in Q4 2021 and the beginning of 2022. During the third quarter, we were able to obtain authorization from the majority of our customers to use the alternative raw materials. Once the alternative raw materials is fully approved by all our customers, we'll accept reduction of the cost production, which will give us the flexibility to offer our customers more options for production, as well as better pricing and more secure sources of raw materials. During the third quarter and to date, we faced significant price increase of some of our raw materials on top of the extra logistic cost of raw material freight. In addition, some of our operation expenses are dominating new Israeli shekels, and were negatively affected by the devaluation of the US dollar against the Israeli new shekel. Nevertheless, we were able to maintain our gross margin at 20.2% in the nine months for the period of 2021, compared to 20.3% in the nine months period of 2020, by keeping our operational costs under tight control. As we said in the past, we see an opportunity to grow our business in the U.S. due to the shift back to the production in the Western world by defense, aerospace, space, and communication PCB sectors as a result of the cyber threat by China and the lack of production capacity in the United States, Europe, and Israel. To date, we have financed our growth strategy from our own internal resource and through right offering to our shareholders. During the first nine months of 2021, we invested $1.4 million in new equipment and we plan to continue investing in sales activity that will enable us to grow revenue with a focus on the U.S. market. We continue to invest in a new advanced manufacturing equipment that will strengthen our manufacturing capability and increase our competitiveness by implementing improved production processes and adoption of the industry 4.0 technologies. We believe that this recent investment and planned future investment will strengthen our manufacturing capability and increase our competitiveness by implementing improved production processes. As previously reported, We applied to the Israeli Land Authority for allocation of land in the north of Israel where we intend to build a second production facility. This is a major part of our long-term strategic roadmap to facilitate and accelerate the expansion of our business. We intend to continue our long-term machinery investment program into 2022 and 2023 with the purchase of new and modern machinery and our focus on investment that will increase our total yield and increase our production capacity. As we have previously reported, we are conducting several R&D programs in order to maintain our position as an innovative industry leader. Our 2021 R&D program is designed to enable Eltech to achieve a significantly faster production rate and reduce scrap. If successful, this R&D program will enhance our ability to offer high-reliability print printed circuit boards in shorter production time and reduced costs. I am glad to report that this R&D program is progressing as planned and approximately 60% of the program has been completed and the demo machine is already in testing mode. There is still more milestone to pass in order to declare on full success. We will continue to pursue new business opportunities and increase customer design engagement activities that will leverage our advanced innovative and technological capabilities. We remain focused on operational excellence by using advanced technology and financial discipline and in making the necessary adjustments to address the challenges we face from the widespread health crisis and the global supply chain crisis. We continue to work delightfully on expanding our business while maintaining operational efficiency and continue to trend the improved operational results. We are focused on business growth, and now we have consistent positive cash flow and strong working capital. We expect to further increase our future investment program as long as we get a clear and high positive return on investment. I will now turn the call over to Alon Moralem, our CFO, to discuss our financials.
Alon Moalem
Thank you, Eli. I would like to draw your attention to the financials of the third quarter of 2021. During this call, I will be discussing certain non-GAAP financial measures. LTCH uses EBITDA as a non-GAAP financial performance measurement. Please see our earnings release for its definition and the reasons for its use. Now I will go over the highlights of the third quarter of 2021 compared to the third quarter of 2020. As Eli mentioned, revenues for the third quarter of 2021 were $8 million compared to revenues of $9.3 million in the third quarter of 2020. Gross profit was $1.4 million or 17.5% of revenues in the third quarter of 2021 compared to 1.8 million or 19.7% of revenues in the third quarter of 2020. During the third quarter of 2021, we had an operating profit of $65,000 as compared to an operating profit of $638,000 in the third quarter of 2020. Net loss was 26,000 or 0 cents per share in the third quarter of 2021 compared to net profit of 598,000 or 14 cents per share in the third quarter of 2020. EBITDA was 553,000 in the third quarter of 2021 as compared to EBITDA of 1 million in the third quarter of 2020. During the third quarter of 2021, we had positive operating cash flow of 598,000 compared to net cash provided by operating activities of 873,000 in the third quarter of 2020. During the nine months of 2021, our operating cash flow was 3.4 million as compared to operating cash flow of 3.7 million in the first nine months of 2020. During the second quarter of 2021, we obtained a loan of 10 million new Israeli shekels or approximately $3.1 million from Bank Lumi that enables us to support our growth plan. The loan is a term of 10 years with favorable terms, including a repayment schedule that starts after 12-month grace period and interest, which is waived for the first year of the loan. As previously announced, we filed a SHIFT registration statement during the third quarter of 2019 to provide us with the ability to raise additional funds to support our plan to grow and expand our business. As Eli mentioned before, we remain focused on operational excellence and financial discipline as well as our long-term strategic growth goals. We are now ready to take your questions.
Operator
Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Michael Wu. Please go ahead.
Michael Wu
Hello. Hi. I just have a question about the reduced working force days. So could you just give me more detail about what is that?
Elie Yaffe
Can you please repeat the question? Reduction in what?
Michael Wu
The working days, the reduction of working days. So what is that? I don't get it, actually.
Elie Yaffe
OK. During September, there were Jewish holidays that unfortunately happened during the working days and not over the weekend, and this is a rare situation. And we faced a significant amount of working days that we were not able to work because of these holidays, Jewish holidays.
Michael Wu
So it's, I mean, you have... kind of a reduction of the, you know, the revenue is slowly from that? Like, I mean, it's like 1.2 or 3 million less revenue. Is that caused by that or totally by that or?
Elie Yaffe
The number of working days that we lose during this time was approximately 10% of the days.
Michael Wu
Oh, that's quite a bit, eh? Okay. So you don't lose any customers or any contracts or something. It's just less working days, right?
Elie Yaffe
There were two effects. First of all, Eltech didn't work during these days. And also our Israeli customers didn't work during these days.
Michael Wu
Okay, okay. That's great. So I didn't find your SG&A increased that much compared to last year. It's just like 100K. So basically, you think that's just because of the currency fluctuation?
Alon Moalem
In general, during the third quarter, we had a negative impact on the profitability. Since salaries, building lease, energy costs are dominated in the new Israeli shekel, that was re-evaluated in Q3 as compared to the U.S. dollar. The financial expenses we present during Q3 is mostly related to the effect of the devaluation of the U.S. dollar and the euro against the new Israeli shekel.
Michael Wu
Okay, okay, that's great. So about the margin, so it's done a little bit. Is that because of the reason you're talking about or it's not?
Elie Yaffe
It doesn't impact our margin because we try to pass some of this devaluation cost on our customers in slow mode.
Michael Wu
Yes, so my question is a little bit lower. I mean, this quarter it's around 70.5% gross margin, right? Last year it's like 19.7%. So what is the reason for that?
Alon Moalem
The main reason is that we had some fixed costs included in our cost of revenues and whenever the revenues are down, this has become a larger part in our expenses as a percentage.
Michael Wu
Okay, great, great. So how about this quarter? So, I mean, in the fourth quarter, so your working days should be, I mean, the same as last year, right? So I assume, like, you're working full-time, so it should be, I mean, there shouldn't be lost any revenues because of that, right?
Elie Yaffe
During quarter four, there is no lost day because of Jewish holidays. It's going to be full quarter.
Michael Wu
It's a full quarter, right?
Elie Yaffe
Yes. Quarter four is full quarter, yeah.
Michael Wu
Okay. Okay. That's great. That's great. Okay. Thank you. Thank you very much.
Elie Yaffe
Thank you, Michael.
Operator
The next question is from Dean Chen of RU Group International. Please go ahead.
Dean Chen
Hi. Hi, Elon. I want to thank you for your service. I noticed that you're past 6K that... that you're resigning from your position of CFO. So I want to thank you for your service.
Alon Moalem
Thank you.
Dean Chen
For working very, very long term for LTCH. But my question is, there is no reason for your resignation stated in the 6-K. And I'm just kind of curious on why you chose to resign.
Alon Moalem
In the last three years that I've been part of Eltech management, the company implemented significant turnaround plans, raised funds, and improved its financial position. I'm very proud of this achievement, and I'm sure that the company will go ahead with its long-term growth plan. I personally decided to pursue other business opportunities But again, I will follow Eltech and look forward to its success. Dean?
Operator
Dean, is there any other question? If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Jaffe to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available tomorrow on LTCH's website, www.nistechltch.com. Mr. Jaffe, would you like to make your concluding statement?
Elie Yaffe
Before we conclude our call, I would like to thank all of our employees for the efforts that make LTECH possible again, even of these challenging times. I would like to thank once again to our customers, partners, investors, and LTECH team for their continued support. I also personally would like to thank Alon Mualem, our CFO, for three years of service. in which implementing together with the management team, the turnaround plan, and improve the company financial position. Thank you all for joining us on today's call. Have a good day.
Operator
This concludes the LTEC LTD third quarter and full year 2021 financial results conference call. Thank you for your participation. You may go ahead and disconnect.
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